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Options traders are bracing for a stock-market crash - MarketWatch

1. Demand for out-of-the-money VIX calls has surged, indicating fear of a market crash. 2. S&P 500 and Nasdaq recorded their worst runs since September amidst market struggles. 3. Significant buying observed in high-strike VIX calls, highest volume since May 2024. 4. The VIX spiked above 50 intraday recently, showing heightened volatility concerns. 5. Manufacturing contraction signals potential economic slowdown, affecting investor sentiment.

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FAQ

Why Bullish?

Increasing demand for VIX call options typically reflects market fear, often boosting VIX prices. Historical instances show sharp rises in VIX during market downturns, indicating potential for further spikes.

How important is it?

The high trading volume of VIX options indicates a significant sentiment shift among traders, which can directly impact VIX prices. Increased protection demand suggests widespread concern about market performance.

Why Short Term?

Immediate market volatility is likely due to current economic signals. A recession forecast can lead to quick changes in investor behavior, impacting VIX in the short-term.

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